A proposed merger for Sprint and T-Mobile
This week Sprint and T-Mobile announced their intentions to merge (again). The move would combine the 3rd and 4th largest wireless operators in the United States. If the deal is approved, the resulting company would be the nation’s second-biggest wireless carrier after Verizon, controlling roughly 100 million customers. Sprint was valued at $26 billion based on its last closing price, and T-Mobile was last valued at $55 billion. The merger was first discussed in 2014 but scrapped because of concerns about regulatory challenges from the Obama administration.
The agreement would leave just three major wireless carriers in the United States but must first clear antitrust regulators.
From what has been announced the combined company would be based in Bellevue, Washington, and will be called T-Mobile. Current T-Mobile CEO John Legere will run the combined company. T-Mobile’s majority owner Deutsche Telekom will hold a 42 percent stake in the company, while Sprint’s majority owner SoftBank will hold 27 percent, with public stakeholders holding the rest. Sprint CEO Marcelo Claure and SoftBank CEO Masayoshi Son will sit on the combined company’s board.
At LotusFlare we like to look at events in the industry through the lens of customer experience.
T-Mobile has probably had the biggest impact in changing the digital customer experience among any US carrier over the past decade. The “Uncarrier” has transformed how customers buy and manage their wireless service. With innovative moves like doing away with long-term contracts that lock customers into a carrier, offering free Netflix, low cost international roaming, and unlimited data plans T-Mobile has been a disruptor in the industry.
T-Mobile Tuesdays have set the bar for reward and loyalty programs. The gift app and #GetThanked campaign lets T-Mobile customers claim weekly bonus offers every Tuesday, including free food, movie tickets, Lyft rides and more, all through its free smartphone app. T-Mobile Tuesdays is available to all T-Mobile subscribers, including prepaid users. Customers can download the app, register their T-Mo phone number, and check back each Tuesday for their exclusive gifts and prize draws. We think these cutting-edge reward and loyalty push the industry forward and benefit the customer.
As a result of these initiatives, and others, T-Mobile moved from #4 to #3 in the US market.
Based on 2017 data from Ookla, T-Mobile has the fastest mobile network in the United States, with a Speed Score of 23.17 on modern devices during Q1-Q2 2017. The combination of a tightly-spaced cell site grid and a smaller subscriber base than Verizon and AT&T could be the keys to T-Mobile’s success in the U.S. market and to their ability to support the exponential growth in mobile data consumption.
Today the whole wireless industry is racing to deploy a next-generation wireless data technology called 5G. Sprint and T-Mobile say that only together can they pour enough resources into a world-class 5G network that’s competitive with AT&T and Verizon. By joining forces, the combined 5G network might be deeper and broader than what either could have deployed individually. But there is still a lot of uncertainty related to 5G and some of the more innovative uses, such as onnected cars and homes, won’t come online until after 2020.
Typically, when a merger like this (really an acquisition by T-Mobile) is announced, there is a fever pitch. Everyone thinks the two companies are on the same page and it’s only a question of getting government approval. In a few cases, mergers that didn’t happen the first time, are often eventually approved on the second try.
Reducing the number of major carriers in the U.S. from four to three will change the competitive landscape in a way that could increase prices. A combined Sprint and T-Mobile could make for one powerhouse of a carrier with the customer base and clout of Verizon and AT&T. 5G network roll out would likely be accelerated.
The deal isn’t expected to finalize until the first half of 2019. Before that happens, the companies need the approval of both the Department of Justice, which will look at antitrust concerns, and the Federal Communications Commission, which examines whether deals are in the public interest.
We’ll stay tuned as developments unfold but we are skeptical the proposed merger will be approved.